Are Holacracy-Powered Organizations Better at Innovating?
More engaged workers. A more responsive organization. Happier customers.
It may sound aspirational to some, but these are the potential benefits of Holacracy, the alternative management structure made popular by Zappos, Medium, and the David Allen Company—all companies known for adopting the framework.
Holacracy can be defined as an organizational structure that many call “manager-free,” where roles are defined around the work, and not the people. Implemented through self-organizing teams, Holacratic organizations typically encourage transparency, autonomy, local decision-making and a common set of rules or governance that workers voluntarily buy-into.
Batterii spoke with Olivier Compagne, a consultant and coach at HolacracyOne, a company that helps other organizations adopt and implement Holacracy. A native from France now living in the United States, Compagne is a psychologist by training who has joined HolacracyOne in its early days, and is now one of its senior Holacracy coaches.
As a growing trend in management thinking, Holacracy is often described with a negative bias or it is oversimplified as an operating structure “without any hierarchy.” Read on to discover the other top misconceptions about Holacracy, as explained and evaluated by Compagne. Then learn how and why Holacracy can be an effective organizational design to fuel greater innovation.
Holacracy embraces a hierarchy of role, rather than a hierarchy of people
Adopting Holacracy doesn’t mean that a company is removing hierarchy or is making the organization completely flat. After all, flat organizations with informal structures do not eliminate hierarchy, argues Compagne, they just make the hierarchy implicit. “There is a hierarchy in Holacracy, but a hierarchy of ‘roles,’ which is different than a hierarchy of people. People can effectively fill different roles at different levels of the hierarchy, so they don’t belong to a specific position. That’s a nuance that isn’t easy to understand, because it’s so different from what we know.”
Holacracy creates an environment in which each role has explicit authority and accountabilities, and within those limits, a lot of autonomy. It’s an environment in which workers are self-organized, but not self-directed.
A misconception persists that Holacracy can simply be thought of as a flat organization, one without any hierarchy, and that myth is often used to discredit Holacracy, explains Compagne. But it’s not a complete picture. “Hierarchy is no longer useful in describing the environment, because you have structure around roles, not structure around people. With Holacracy, one person can have different roles at different levels of the organization.”
It’s not a one-to-one relationship with a role, adds Compagne. “A role doesn’t define you, it doesn’t even define your ‘position’ at the company. It’s just one of the roles you fill and, therefore, in one situation I might fill a role that is subordinate to one of my colleagues’ role, and in another situation I might be fill a role that he is supposed to follow. This mix of leadership and followership is both empowering and humbling at the same time.”
Holacracy does not mean getting rid of structure
For many brands, it’s not too much structure that’s getting in the way of innovation, it’s too much of inappropriate structure serving as a barrier.
“The idea that there is no structure is the number one misconception about Holacracy,” says Compagne. “People assume that since you don’t have managers, you have no structure. Which is, of course, an oversimplification—there is more to the idea than just ‘no managers.’”
Compagne explains there is actually more structure in Holacracy than in conventional management. “That’s because the goal of Holacracy is to get clarity on who is doing what,” he says. That means putting it clearly in writing, and then adjusting that definition and description over time. “That’s how we can be nimble, and evolve, and adapt quickly.” This hierarchy of organizational roles is flexible and the workers know roles can, and will, adapt so that people can work optimally together.
Holacracy in action looks like lean startup’s feedback loops
By definition, Holacracy changes how power is distributed and how a company structures itself. Compagne says that one of the benefits HolacracyOne experiences is the ability to utilize collective wisdom faster so that they can absorb change and adapt quickly as a company.
“We’re able to be very experimental. We have a lot of changes going on,” he says, acknowledging that feedback and information that is collected can be acted upon quickly. This translates to frequent incremental changes, and a greater capacity to innovate desirable, customer-centric solutions.
“There are less politics involved for changing who’s responsible for what. There are also more people who can propose changes or ideas, and changes can happen at any level of the organization, so we can reliably process information faster.”
Holacracy helps human-centered companies design a structure that ultimately benefits consumers
Companies using Holacracy invite workers to be more engaged in their work, thanks to how they are trusted to be autonomous and how they are given a voice within the company. “You not only have a voice, but your voice can have an impact. That’s very meaningful and encourages greater engagement.”
Compagne says that kind of structure means greater opportunity for innovation, and perhaps just as important, it helps remove the top barriers to innovation: “The rules of Holacracy prevent, in many ways, micromanagement. It’s very hard to micromanage in Holacracy. At the same time, there is clarity around what you can expect from each other. Within those boundaries, there is a lot of autonomy on how things get done, and with autonomy, you have creativity.”
Compagne says that in many conventional organizations, ideas can lack the proper pathway to become realized, or they can get lost within an organization. “Holacracy removes those obstacles so that [you] can support innovative thinking.”
Everything in Holacracy is centered around the purpose of the organization, and this purpose translates by definition into addressing some customer need. As a result, in Holacracy, organizations can be better suited and more focused on customer needs and desires, explains Compagne. “Holacracy is very externally focused. That means Holacracy can help a company be more agile, more responsive, [and] better aligned to its purpose of solving a customer problem.”
Holacracy embraces tension, and that tension fuels innovation
Holacracy-powered companies aren’t without tension. Rather, tension is fundamental to Holacracy—and it’s also how Holacracy spurs innovation. “Holacracy is designed to resolve organizational tension. By tension, we just mean a very neutral definition. It doesn’t mean it’s bad necessarily, it is just a gap between the way things are now, and the way they could be better,” says Compagne. “It could be a process hole you’re noticing, or a new need from customers that you’re not yet organized to address.”
“Everyday in organizations people experience tensions, but rarely do they have clear pathways to make something productive out of them. Holacracy is a system that offers pathways to let the people use their creativity and process those tensions into meaningful change for the organization.”
Compagne shares that he actually sees more tensions surface in Holacracy compared to a traditional hierarchy. “The goal of Holacracy is not to remove tensions, it is to process them rapidly, which will invite more tensions. However you’re more equipped to process those tensions faster, which gives you more responsiveness, speed and more productivity.”
Want to know more about Holacracy? Visit Holacracy.org to learn more.
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Olivier Compagne is a partner at HolacracyOne, a company that helps other companies implement Holacracy — the distributed authority system to run their organization. HolacracyOne helps other companies become more adaptive, responsive and purposeful. Follow Olivier Compagne on Twitter @oliviercp.
Kim Sykes is a content creator at Batterii, enterprise software designed to help companies scale innovation. Global 2000 companies rely on Batterii to support the innovation process through research, trend spotting, product and service design and concept development. Follow @batterii.